5 Major 2015 Policy Actions that will Shape the Food & Ag Industry in 2016

Last year, we saw a surge in the number of policy shifts and regulatory moves affecting food and agriculture in the US. Lawmakers took major steps and made countless new proposals towards changing food and agriculture’s regulatory landscape. The following list represents five major food and ag policy shifts from 2015 that will likely have a ripple effect into the new year. Get yourself up to speed as we start what’s sure to be another dynamic year for food and ag policy.

Food Labeling & Regulation of Biotechnology

The question of whether companies should be required to label genetically modified foods — and who should be responsible for enforcing the requirement — was one of the hottest issues in 2015. In March 2015, a pair of lawmakers introduced the Safe and Accurate Food Labeling Act of 2015, which would create a voluntary GMO labeling scheme and give administration of the program to the US Food and Drug Administration (“FDA”). On July 23, 2015, the US House of Representatives passed the bill, sending it to the Senate where it still awaits consideration.

Proponents of the bill argue that federal GMO labeling is necessary to prevent inconsistent regulation of GMO labeling at the state level while others applaud the bill’s voluntary approach. Opponents of the measure contend that the lack of a mandatory requirement falls short of addressing many consumers’ demand to know what’s in their food. Vigorous opponents of the measure have nicknamed it the “Deny Americans the Right to Know” or “DARK Act.”

The bill was introduced after a number of states’ proposed GMO labeling schemes, with Vermont Maine and Connecticut passing such measures. Set to take effect in July 2016, Vermont passed a law that would require food retailers and manufacturers to state whether raw or processed foods sold in the state were produced in whole, or in part, with genetic engineering. The Grocery Manufacturers Association filed a legal challenge to the bill, and the litigation will likely continue well into 2016.

In late 2015, after mounting pressure from consumers and the courts, the FDA requested public comments on how they think the term ‘natural’ should be used in food labeling. Currently, the FDA does not have a rule governing when food manufacturers may use the term, and has only objected to its use where food contains added colors, artificial flavors, or synthetic substances. The controversy has led to a landslide of state and national class action lawsuits challenging producers’ use of the label ‘natural’. Despite the call for comments, the FDA was careful to note that the request should not be interpreted as the agency’s intention to promulgate an official rule for ‘natural’ food labeling.

Meanwhile, in July 2015, the White House announced its plan to overhaul the existing regulatory framework that governs biotechnology products. Established in 1986, the Coordinated Framework for the Regulation of Biotechnology requires the USDA, the FDA, and the Environmental Protection Agency (EPA) to take a collaborative, risk-based approach to approving biotechnology products. The White House’s recent move represents the first effort to reexamine the standard since its adoption 29 years ago.

GMO labeling will probably remain a heated topic in 2016, with the Senate vote on the Safe and Accurate Food Labeling Act, the FDA’s consideration of ‘natural’ food labeling, and the White House’s revamp of the Coordinated Framework far from complete at the close of 2015. In the meantime, consumers can sink their teeth into the first FDA-approved genetically modified animal for food consumption: AquAvantage Salmon.

2. The Ethanol Standard

On November 30, 2015, the Environmental Protection Agency (EPA) released its long-awaited Renewable Fuel Standards (RFS) for 2014, 2015, and 2016, which also included its volume requirements for biomass-based diesel for 2017. The agency missed a series of deadlines for releasing the yearly standards, adding more fuel to the already protracted debate about the program. Although the final rule increased the amount of ethanol and alternative fuels that must be blended into US fuel supply in 2016, it fell short of mandating the amounts envisioned when the RFS program was launched in 2005. The EPA’s 2015 standard sets a goal of blending nearly 18 million gallons of renewable fuels into the nation’s fuel supply during 2016—over 4 billion gallons shy of the 2016 levels anticipated in the RFS’ statute.

The RFS program is intended to reduce greenhouse gas emissions while reducing US dependence on oil imports. Under the program, a certain amount of renewable fuels must replace or reduce the amount of petroleum-based transportation fuel, heating oil, or jet fuel. Four types of renewable fuels qualify under the RFS: biomass-based diesel, cellulosic biofuel, advanced biofuel, and total renewable fuel. The program’s ultimate goal is a total of 36 billion gallons of renewable fuels blended into the nation’s fuel supply by 2022—roughly twice the 2016 levels.

Arguments for and against the continuation of the program run the gamut. Opponents of the program point to the so-called “blend wall” problem, which asserts that the majority of vehicles are not intended to operate with fuel containing more than 10 percent ethanol-based fuel (E10). They also point out that the program relies primarily on corn-based ethanol production, which contributes to the many environmental stresses linked with monocropping in the U.S. corn belt, including both water and soil issues. These hidden costs lead many critics to question whether the RFS program has been a success in promoting a more environmentally friendly fuel supply. And restaurant groups have criticized the program, citing higher food costs as the price of corn-based livestock feed increases.

Proponents of the program reject the blend wall problem, describing it as Big Oil’s baseless attempt to get Congress to repeal the program altogether. According to Big Oil advocates, the program creates a “subsidy in disguise” for America’s 90 million acre corn crop and other crops used to create alternative fuels. Whether or not the blend wall is a real issue of concern continues to be hotly debated. They also say the program provides a strong incentive for continued innovation in renewable fuels, warning that repeal of the program may dampen research and development.

The battle between renewable fuel and Big Oil is sure to wage on well into 2016 and beyond.

3. The Food Safety Modernization Act

In 2011, President Obama signed into law the Food Safety Modernization Act (FSMA), a sweeping reform designed to shift the US food safety system from a reactive system to a more proactive method for thwarting foodborne illness outbreaks. The move represents the first major revision of the country’s food safety system since 1938 and imposes new requirements for farmers, food retailers, and everyone in between.

In September 2015, the FDA released the first major rules under FSMA aimed at setting preventative controls for human food and animal food. In November, the agency dropped three major rules at the heart of the legislation: the produce safety rule, the foreign supplier verification programs rule, and the accredited third-party certification rule. Overall, the legislation requires food producers and manufacturers to create and follow detailed plans identifying potential sources of food contamination and to identify ways to prevent pathogens from entering the food chain.

FDA’s produce safety rule, for example, imposes new standards for on-farm food handling, including the growing, harvesting, packing, and storing produce intended for human consumption. One facet of the rule focuses on agricultural water, mandating that any water likely to come into contact with produce or food-contact surfaces is safe and of sufficient sanitary quality. Farmers must also conduct periodic inspections and tests to ensure measures are working appropriately. The rule also imposes mandatory waiting periods between grazing and crop harvest where there is a reasonable probability of contamination.

These are but two examples of the many new requirements that farmers and food producers must satisfy, causing some serious headaches along the food supply chain. While many growers and integrators are scratching their heads over how to adopt new practices, some agtech startups may find a new market for software designed to help producers manage FSMA’s safety checks, inspections, and reporting requirements.

A devastating salmonella outbreak, which claimed nine lives and sickened hundreds of individuals, prompted FMSA. The source of the pathogen was eventually linked to the Peanut Corporation of America (PCA). An investigation into the company’s practices revealed severe lapses in food safety and led to the federal conviction of the corporation’s CEO, Stewart Parnell, who approved dissemination of countless peanut products despite tests indicating the products contained salmonella.

A recent series of outbreaks around the country has become the focus of national attention after big names like Chipotle Mexican Grill were affected. In Chipotle’s case, it led to a federal investigation into the restaurant’s food safety practices.

The public’s focus on food safety puts added pressure on farmers to figure out what FSMA requires and to quickly implement its provisions. Compliance will likely mean major costs for farmers, hitting small- and mid-scale operations the hardest, and potentially leading some producers to exit the market altogether. Although large-scale operations have the resources to retool under FSMA’s reign, the law requires a new level of on-the-ground scrutiny that Big Ag may find tedious and time-consuming.

4. The Waters of the United States (WOTUS)

In May 2015, the EPA and the US Army Corps of Engineers released their final rule defining the scope of waters falling within the federal entities’ jurisdiction under the Clean Water Act (CWA). Updating rules that haven’t been touched for over 25 years, the action was a response to inconsistent interpretation among state and federal courts regarding the regulatory authority provided to the EPA and Corps under the CWA.

The final regulation updates the administrative definition of “waters of the United States,” (WOTUS) which defines which waters are ”jurisdictional,” or subject to the CWA’s regulatory requirements. Waters that fall outside the scope of the WOTUS definition are not subject to the CWA’s federal regulations. While the EPA and Corps have jurisdiction over major waterways like the Mississippi River, it’s not clear how far upstream that authority flows.

According to its text, the rule protects tributaries that have the physical appearance of flowing water, ditches that “look and act” like tributaries, while providing new authority for the EPA and the Corps to regulate regional water features on a case-by-case basis. Agricultural exemptions are provided for a number of activities, including normal farming and ranching practices. The EPA has released a fact sheet discussing how the rule affects agriculture.

Many farmers and agricultural groups described the final rule as a major expansion of the EPA’s jurisdiction over the nation’s waterways, giving federal authorities the power to penalize farmers anytime a jurisdictional body of water is involved. A bipartisan group in the House of Representatives took action against the rule, voting to block its enforcement while a similar measure was introduced in the Senate. The EPA continues to defend the rule, saying that water quality and health are under threat from poor state and local regulation and an absence of enforcement.

Twenty-nine states filed two separate lawsuits against the Corps challenging WOTUS, which took effect on June 29, 2015, alleging that the EPA unlawfully expanded its federal authority over state water resources and lands outside the scope of what Congress intended when it enacted the CWA. Ultimately, the Sixth Circuit Court of Appeals entered a nationwide stay against the rule, which suspends its enforcement pending the outcome of the plaintiffs’ legal challenge, making it another hot issue to watch in 2016.

According to the agency, sugar comprises roughly 13.5 percent of Americans’ daily diets. The USDA’s Economic Research Service (ERS) reports that Americans consume more sugar than any other country in the world, including high-fructose corn syrup. As one of the largest global sugar producers, the United States is one of the few countries that produces substantial amounts of sugarcane and sugar beets.

Food manufacturers add sugars under a variety of names to a surprising number of products, including soup, salad dressing, yogurt, and more. Many manufacturers are opposed to the agency’s move, pointing to a study indicating that consumers tend to overestimate the amount of sugar in products that list added sugars and that this might lead them to forgo buying the items. Some health officials have described the proposal as futile, contending that the body does not distinguish between naturally-occurring and added sugars.

Big food producers entered into the debate during the year; Coca-Cola spent roughly $15 million in lobbying dollars to tamp down DGAC’s sugar scrutiny. Released on January 7, 2016, the final dietary guidelines include the committee’s concerns about sugar consumption, much to the sugar industry’s dismay.

The new recommendations will be cause for concern among sugar producers, especially those in the high-fructose corn syrup market. If the FDA moves forward with the new Nutrition Facts Panel, manufacturers who currently incorporate added sugars in their products may soon be revamping their recipes to keep consumers interested, decreasing demand for HFCS and other sweeteners.

Red meat also garnered notable attention in 2015’s discussion of nutritional standards. In February 2015, the DGAC concluded that diets rich in plant-based foods and lower in red meat lead to increased health while also promoting environmental sustainability. A number of groups, including federal lawmakers, challenged DGAC’s consideration of sustainability issues in its 2015 update, stating that such an endeavor was beyond the committee’s charter.

Ultimately, USDA Secretary Tom Vilsack and HHS Secretary Sylvia Burwell, who are tasked with overseeing preparation of the guidelines, decided to leave sustainability out of the dietary guidelines equation, stating in a press release that sustainability is handled through other top-level initiatives.

In October 2015, the World Health Organization released a report linking the consumption of processed meat to colorectal cancer, adding further fuel to the fire over Americans’ meat consumption. The final guidelines lack a clear recommendation against meat consumption, stating instead that teenage and adult males should “reduce overall intake of protein foods by decreasing intakes of meat, poultry, and eggs,” while also listing lean meats as part of a healthy diet.

What’s your view on the regulatory environment in the US for food and agriculture? Get in touch at lmanning@agfunder.com.

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